EXHIBIT 99.5
SECURITIES PURCHASE AGREEMENT
among
LASERSIGHT INCORPORATED
and
PEQUOT FUNDS
June 12, 1998
TABLE OF CONTENTS
ARTICLE 1
PURCHASE AND SALE OF COMMON STOCK
1.1 Purchase of Common Stock
1.2 Form of Payment
1.3 Transfer of Common Stock
1.4 Registration of the Securities
ARTICLE 2
PURCHASER'S REPRESENTATIONS AND WARRANTIES
2.1 Investment Purpose
2.2 Accredited Investor Status
2.3 Reliance on Exemptions
2.4 Information
2.5 Governmental Review
2.6 Transfer or Resale
2.7 Authorization
2.8 Binding Effect
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1 Organization and Qualification
3.2 Authorization; Enforcement
3.3 Capitalization
3.4 Issuance of Shares
3.5 No Conflicts
3.6 SEC Documents
3.7 Absence of Certain Changes
3.8 Absence of Litigation
3.9 Disclosure
3.10 S-3 Registration
3.11 No General Solicitation
3.12 No Integrated Offering
3.13 No Brokers
3.14 Intellectual Property
3.15 Employee Benefit Plans
TABLE OF CONTENTS
(continued)
3.17 Equity Investments; Subsidiaries
3.18 Title to Assets and Properties; Insurance
3.19 Compliance with Laws; Permits
3.20 Taxes
3.21 Environmental Matters
3.22 Suppliers and Customers
3.23 Holding Company Act and Investment Company Act
3.24 Foreign Corrupt Practices
3.25 Accounts Receivable
3.26 Series B Preferred Stock
3.27 Foothill Capital Corporation
ARTICLE 4
COVENANTS
4.1 Best Efforts
4.2 Securities Laws
4.3 Reporting Status
4.4 Use of Proceeds
4.5 Future Financings
4.6 Rights of First Offer
4.7 Expenses
4.8 Corporate Governance
4.9 Listing
4.10 Prospectus Delivery Requirement
4.11 Transactions with Affiliates
4.12 Stockholders Rights Plan
ARTICLE 5
TRANSFER OF SECURITIES
5.1 Restrictive Legend
5.2 Notice of Proposed Transfer
5.3 Termination of Restrictions
5.4 Compliance with Rule 144 and Rule 144A
5.5 Non-Applicability of Restrictions on Transfer
TABLE OF CONTENTS
(continued)
ARTICLE 6
CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL
6.1 Conditions to the Company's Obligation to Sell
ARTICLE 7
CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE
7.1 Conditions to Purchaser's Obligation to Purchase
ARTICLE 8
GOVERNING LAW; MISCELLANEOUS
8.1 Governing Law; Jurisdiction
8.2 Counterparts
8.3 Headings
8.4 Severability
8.5 Entire Agreement; Amendments
8.6 Notice
8.7 Successors and Assigns
8.8 Third Party Beneficiaries
8.9 Survival
8.10 Indemnification
8.11 Stamp Tax and Delivery Costs
8.12 Public Filings; Publicity
8.13 Further Assurances
8.14 Remedies
8.15 Termination
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT ("Agreement") is entered into as of
June 12, 1998, by and among LaserSight Incorporated, a Delaware corporation (the
"Company"), with its headquarters located at 00000 Xxxxxxx Xxxxx, Xxxxx 000,
Xxxxxxx, Xxxxxxx 00000 and the purchasers (collectively, the "Purchasers" and
each individually, a "Purchaser") named on the execution pages hereof, with
regard to the following:
RECITALS
A. The Company and the Purchasers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Section 4(2) of the Securities Act of 1933 (the "Securities
Act") and Regulation D ("Regulation D") of the Securities and Exchange
Commission (the "SEC") promulgated under the Securities Act.
B. The Purchasers desire to purchase, upon the terms and conditions
stated in this Agreement, 2,000,000 shares of the Company's Series D Convertible
Participating Preferred Stock (the "Preferred Stock") issued pursuant to the
Certificate of Designation, Preferences and Rights of Series D Convertible
Participating Preferred Stock (the "Certificate of Designation") attached hereto
as Exhibit A, which shall be convertible into shares of the Company's common
stock, $.001 par value per share ("Common Stock"). The shares of Common Stock
issuable upon the conversion of the Preferred Stock are referred to herein as
the "Conversion Shares". The Preferred Stock and the Conversion Shares are
collectively referred to herein as the "Securities."
C. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
of even date herewith in the form attached hereto as Exhibit B (the
"Registration Rights Agreement"), pursuant to which the Company has agreed to
provide certain registration rights under the Securities Act and applicable
state securities laws and a Standstill Agreement in the form attached hereto as
Exhibit C (the "Standstill Agreement"), pursuant to which the Purchasers agree
to restrict the Purchaser's acquisition of the Company's voting securities. The
Registration Rights Agreement, the Certificate of Designation and the Standstill
Agreement are collectively referred to herein as the "Ancillary Documents").
AGREEMENTS
NOW, THEREFORE, in consideration of the foregoing recitals (which are
incorporated into and deemed a part of this Agreement), their respective
promises contained herein and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Company and the Purchasers
hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF COMMON STOCK
1.1 Purchase of Common Stock. Subject to the terms and conditions of
this Agreement, on June 12, 1998 or, if later, the date on which all conditions
set forth in Articles 6 and 7 hereof have been either satisfied or waived, or
such other date as may be determined by mutual agreement of the Purchasers and
the Company, but in no event later than June 15, 1998 (the "Closing Date"), the
Company agrees to issue and sell to each Purchaser, and each Purchaser severally
agrees to purchase from the Company (the "Closing"), the number of shares of
Preferred Stock indicated below at a price of $4.00 per share resulting in an
aggregate purchase price of $8,000,000 (the "Purchase Price"):
No. of Shares of
Purchaser Preferred Stock Purchase Price
--------- --------------- --------------
Pequot Private Equity Fund, L.P. 1,553,331 $6,213,324
Pequot Scout Fund, L.P. 250,000 1,000,000
Pequot Offshore Private Equity Fund, Inc. 196,669 786,676
--------- ----------
Total 2,000,000 $8,000,000
========= ==========
Each Purchaser's obligation to purchase Common Stock hereunder is
distinct and separate from each other Purchaser's obligation to purchase, and no
Purchaser shall be required to purchase hereunder more than the number of shares
of Preferred Stock set forth opposite its name immediately above. The
obligations of the Company with respect to each Purchaser shall be separate from
the obligations of each other Purchaser and, except as provided in Section
6.1(c) hereof, shall not be conditioned as to any Purchaser upon the performance
of obligations of any other Purchaser. The Closing shall take place on the
Closing Date at 10:00 A.M., Eastern Time, at the offices of Fried, Frank,
Harris, Xxxxxxx & Xxxxxxxx, One Xxx Xxxx Xxxxx 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx
00000, or at such other time and place as shall be agreed upon by the parties.
At the Closing, the Company shall deliver to each Purchaser a
certificate or certificates representing the shares of Preferred Stock purchased
by such Purchaser, registered in the name of such Purchaser or its nominee.
Delivery of such certificates to a Purchaser shall be made against receipt at
the Closing by the Company from such Purchaser of the purchase price therefor,
which shall be paid by wire transfer to an account designated at least one
business day prior to the Closing by the Company.
1.2 Form of Payment. Upon satisfaction of the conditions contained in
Section 7.1, each Purchaser shall pay its respective portion of the Purchase
Price by wire transfer to the account designated by the Company.
1.3 Transfer of Common Stock. The Securities shall, when issued, be
unregistered and therefore subject to the restrictions on sale, distribution and
transfer imposed under the Securities Act and under applicable securities laws
or blue sky laws of any state or foreign jurisdiction.
1.4 Registration of the Securities. Pursuant to the terms of the
Registration Rights Agreement, the Company shall, at its own expense, prepare,
and within 45 days after the Closing Date, file with the SEC a registration
statement on such form as is then available in order to effect the registration
of the Conversion Shares (the "Registration Statement"). The Company shall use
all reasonable best efforts to have the Registration Statement declared
effective as soon as practicable after the filing thereof and to remain
effective for the Registration Period (as defined in the Registration Rights
Agreement).
ARTICLE 2
PURCHASER'S REPRESENTATIONS AND WARRANTIES
Each Purchaser represents and warrants, solely with respect to itself
and its purchase hereunder and not with respect to any other Purchaser or the
purchase hereunder by any other Purchaser (and no Purchaser shall be deemed to
make or have any liability for any representation or warranty made by any other
Purchaser), to the Company as set forth in this Article 2. No Purchaser makes
any other representations or warranties, express or implied, to the Company in
connection with the transactions contemplated hereby and any and all prior
representations and warranties, if any, which may have been made by a Purchaser
to the Company in connection with the transactions contemplated hereby shall be
deemed to have been merged in this Agreement and any such prior representations
and warranties, if any, shall not survive the execution and delivery of this
Agreement.
2.1 Investment Purpose. Such Purchaser is purchasing the Preferred
Stock for Purchaser's own account for investment only and not with a view toward
or in connection with the public sale or distribution thereof. Such Purchaser
will not, directly or indirectly, offer, sell, pledge or otherwise transfer the
Preferred Stock or any interest therein except pursuant to transactions that are
exempt from the registration requirements of the Securities Act and/or sales
registered under the Securities Act. Such Purchaser understands that it must
bear the economic risk of this investment indefinitely, unless the Securities
are registered pursuant to the Securities Act and any applicable securities laws
or blue sky laws of any state or foreign jurisdiction an exemption from such
registration is available, and that the Company has no intention or obligation
to register any of the Securities other than as contemplated by Section 1.4
hereof and the Registration Rights Agreement.
2.2 Accredited Investor Status. Such Purchaser represents and warrants
that it is an Accredited Investor (as that term is defined in Rule 501
promulgated by the SEC under the Securities Act), that it has such knowledge and
experience in business and financial matters as to be capable of evaluating the
merits and risks of the investment contemplated to be made hereunder, and that
it (i) was not formed or organized for the specific purpose of investing in the
Company; (ii) understands that such investment bears a high degree of risk and
could result in a total loss of its investment; and (iii) has sufficient
financial strength to hold the same as an investment and to bear the economic
risks of such investment (including possible loss of such investment) for an
indefinite period of time.
2.3 Reliance on Exemptions. Such Purchaser acknowledges that the
Securities being sold to it hereunder are being sold pursuant to a private
offering exemption under the Securities Act and are not being registered under
the Securities Act or under the securities laws or blue sky laws of any state or
foreign jurisdiction and understands that the Company is relying upon the truth
and accuracy of, and such Purchaser's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of such Purchaser set
forth herein in order to determine the availability of such exemptions and the
eligibility of such Purchaser to acquire the Securities.
2.4 Information. Such Purchaser has been furnished all materials
relating to the business, finances and operations of the Company and materials
relating to the offer and sale of the Securities which it has specifically
requested, including without limitation the Company's Annual Report on Form 10-K
and 10-K/A for the year ended December 31, 1997, its Quarterly Report on Form
10-Q for the period ended March 31, 1998, its Current Reports on Form 8-K filed
with the SEC on March 13, 1998, March 16, 1998 and March 18, 1998, the
description of the Common Stock contained in the Company's Form 8-A/A (Amendment
No. 3) filed with the SEC on September 29, 1997 and Proxy Statement dated May
28, 1998 (such documents, including any financial statements and related notes
included in such documents, collectively the "Furnished SEC Documents"). Such
Purchaser and its advisors have been given the opportunity to obtain information
and to examine all documents referred to herein and to ask questions of, and to
receive answers from, the Company or any person acting on its behalf concerning
the Company and the terms and conditions of this investment, and to obtain any
additional information, to the extent the Company possesses such information or
could acquire it without unreasonable effort or expense, to verify the accuracy
of any information previously furnished. All such questions have been answered
to such Purchasers' full satisfaction, and all information and agreements,
documents, records and books pertaining to this investment which such Purchaser
has requested have been made available to the Purchasers or their advisors. Such
Purchaser understands that its investment in the Securities involves a high
degree of risk, including without limitation the risks and uncertainties
disclosed under the caption "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Risks Factors and Uncertainties" in the
Furnished SEC Documents. In making its investment decision, such Purchaser has
not relied on any oral or written representation, other than those contained in
the Furnished SEC Documents or this Agreement (including the schedules hereto)
and the Ancillary Documents, with respect to the Securities, the Company, its
business or prospects, or other matters. In making its decision to invest in the
Company, such Purchaser has relied solely upon independent investigations made
by the Purchasers and their advisors.
2.5 Governmental Review. Such Purchaser understands that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.
2.6 Transfer or Resale. Such Purchaser understands that (i) the
Securities have not been and are not being registered under the Securities Act
or under the securities laws or blue sky laws of any state or foreign
jurisdiction, and may not be offered, sold, pledged or otherwise transferred
unless subsequently registered thereunder or an exemption from such registration
is available, and neither the Company nor any other person is under any
obligation to register the Securities under the Securities Act or under the
securities laws or blue sky laws of any state or foreign jurisdiction or to
comply with the terms and conditions of any exemption thereunder (in each case,
other than pursuant to this Agreement or the Registration Rights Agreement), and
(ii) any sale of the Securities made in reliance on Rule 144 under the
Securities Act, or a successor rule ("Rule 144"), may be made only in accordance
with the terms of Rule 144 and Article 5 hereof and further, if Rule 144 is not
applicable, any resale of the Securities without registration under the
Securities Act under circumstances in which the seller may be deemed to be an
underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules and
regulations of the SEC thereunder.
2.7 Authorization. Such Purchaser represents and warrants that as of
the Closing Date the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated herein have been duly
authorized by it. The fulfillment of and compliance with the terms of this
Agreement will not (i) conflict with or result in a breach of the terms,
conditions or provisions of, (ii) constitute a default under, or (iii) result in
a violation of, breach of or default under (A) its partnership agreement or
certificate of limited partnership, or other charter or constituent document,
(B) any law, statute, rule or regulation to which it is subject, or (C) any
agreement, instrument, order, judgment or decree to which it is subject or is a
party or by which it is bound.
2.8 Binding Effect. Such Purchaser represents and warrants that this
Agreement constitutes its valid and binding obligation, enforceable in
accordance with its terms, except (i) as limited by bankruptcy, insolvency or
other laws affecting the enforcement of creditors' rights generally or by
equitable principles in any action (legal or equitable), (ii) that the
availability of equitable relief is subject to the discretion of the court
before which any proceeding thereof may be brought, and (iii) that the
enforceability of the indemnification provisions may be limited by applicable
securities laws or public policy.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each Purchaser, except as
disclosed (including, in the case of financial statements, provided for) in the
disclosure schedules delivered herewith, as set forth in this Article 3. The
Company does not make any other representations or warranties, express or
implied, to Purchasers in connection with the transactions contemplated hereby
and any and all prior representations and warranties, if any, which may have
been made by the Company to a Purchaser in connection with the transactions
contemplated hereby shall be deemed to have been merged in this Agreement and
any such prior representations and warranties, if any, shall not survive the
execution and delivery of this Agreement.
3.1 Organization and Qualification. Each of the Company and its
subsidiaries is a corporation duly organized and existing in good standing under
the laws of the jurisdiction in which it is incorporated, and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted or are presently expected to be conducted during the Company's current
fiscal year. Each of the Company and its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
where the failure so to qualify or be in good standing would have a Material
Adverse Effect. For purposes of this Agreement, "Material Adverse Effect" means
any material adverse effect on the business, operations, assets, properties,
prospects, liabilities, condition (financial or otherwise) or operating results
of the Company and its subsidiaries, taken as a whole on a consolidated basis,
or on the transactions contemplated hereby.
3.2 Authorization; Enforcement.
(a) The Company has the requisite corporate power and
authority to enter into and perform this Agreement, and to issue, sell and
perform its obligations with respect to the Preferred Stock, and when converted,
the Conversion Shares in accordance with the terms hereof and thereof;
(b) the execution, delivery and performance of this Agreement
and the Ancillary Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby (including without limitation the
issuance of the Preferred Stock and reservation for issuance of the Conversion
Shares) have been duly authorized by all necessary corporate action and, except
for the filing of the Certificate of Designation and except as set forth on
Schedule 3.2 hereof, no further consent or authorization of the Company, its
board of directors, or its stockholders or any other person, body or agency is
required with respect to any of the transactions contemplated hereby (whether
under rules of The NASDAQ Stock Market, the National Association of Securities
Dealers, Inc. or otherwise);
(c) this Agreement, the Ancillary Documents, and the
certificates for the Preferred Stock have been, and, when issued the Conversion
Shares, will be duly executed and delivered by the Company; and
(d) this Agreement, the Ancillary Documents and the Preferred
Stock constitute legal, valid and binding obligations of the Company enforceable
against the Company in accordance with their respective terms, except (i) to the
extent that such validity or enforceability may be subject to or affected by any
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement thereof, creditors' rights
or remedies of creditors generally, or by other equitable principles of general
application, (ii) that the availability of equitable relief is subject to the
discretion of the court before which any proceeding thereof may be brought, and
(iii) that the enforceability of indemnification provisions may be limited by
applicable securities law or public policy.
3.3 Capitalization. The capitalization of the Company as of the date
hereof, including the authorized capital stock, the number of shares issued and
outstanding, the number of shares reserved for issuance pursuant to the
Company's stock option plans, the number of shares reserved for issuance
pursuant to securities (other than the Preferred Stock) exercisable for, or
convertible into or exchangeable for any shares of Common Stock and the number
of shares reserved for issuance upon conversion of the Preferred Stock is set
forth on Schedule 3.3. All of such shares of capital stock have been, or upon
issuance in accordance with the terms of the relevant security will be, validly
issued, fully paid and nonassessable. No shares of capital stock of the Company
(including the Securities) are subject to preemptive rights or any other similar
rights of the stockholders of the Company or any liens or encumbrances imposed
or suffered by the Company. Except as disclosed in Schedule 3.3, as of the date
of this Agreement, there are no outstanding options, warrants, scrip, rights to
subscribe for, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into or exercisable or exchangeable for, any
shares of capital stock of the Company or any of its subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries. The Company shall provide each
Purchaser with a written update of this representation signed by the Company's
Chief Executive Officer or Chief Financial Officer on behalf of the Company as
of the Closing Date. Except as set forth in Schedule 3.3, since December 31,
1997, the Company has not declared or paid any dividend or made any other
distribution of cash, stock or other property with respect to the Common Stock.
Except as set forth in Schedule 3.3 or as contemplated by this Agreement or the
Ancillary Documents or except for the right to vote its shares of Common Stock
for the election of directors, no person has the right to nominate or elect one
or more directors of the Company. The Preferred Stock issued to Purchasers at
the Closing under this Agreement represents, in the aggregate, 9.17% of Total
Current and Potential Shares (as defined on Schedule 3.3).
3.4 Issuance of Shares. The Preferred Stock and Conversion Shares are
duly authorized and reserved for issuance, and upon conversion of the Preferred
Stock in accordance with the terms of the Certificate of Designation will be,
validly issued, fully paid and non-assessable with no personal liability
attaching to the owners thereof, and free from all taxes, liens, claims and
encumbrances imposed or suffered by the Company and will not be subject to
preemptive rights or other similar rights of stockholders of the Company.
3.5 No Conflicts. The execution, delivery and performance of this
Agreement and the Ancillary Documents by the Company, and the consummation by
the Company of transactions contemplated hereby and thereby (including, without
limitation, the issuance and reservation for issuance, as applicable, of the
Securities) will not (i) result in a violation of the Certificate of
Incorporation or By-laws, or (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
result in any loss of benefit under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any Contract (as
defined herein) to which the Company or any of its subsidiaries is a party, or
(iii) result in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations) applicable
to the Company or any of its subsidiaries, or by which any property or asset of
the Company or any of its subsidiaries, is bound or affected, or (iv) result in
the creation or imposition of an Encumbrance (as defined herein) upon the
Company's properties or assets (except with respect to items (ii), (iii) and
(iv) of this Section 3.5 such possible conflicts, defaults, terminations,
amendments, accelerations, cancellations, violations and Encumbrances as would
not individually or in the aggregate, have a Material Adverse Effect). Neither
the Company nor any of its subsidiaries is in violation of its Certificate of
Incorporation or other organizational documents, and neither the Company nor any
of its subsidiaries, is in default (and no event has occurred which has not been
waived which, with notice or lapse of time or both, would put the Company or any
of its subsidiaries in default) under, nor has there occurred any event giving
others (with notice or lapse of time or both) any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its subsidiaries is a party, except
for possible violations, defaults or rights as would not individually or in the
aggregate, have a Material Adverse Effect. The businesses of the Company and its
subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any governmental entity, except for possible violations the
sanctions for which either singly or in the aggregate would not have a Material
Adverse Effect. Except as set forth on Schedule 3.5, or except (i) such as may
be required under the Securities Act in connection with the performance of the
Company's obligations pursuant to the Registration Rights Agreement, (ii) filing
of the Certificate of Designation with the Secretary of State of Delaware, (iii)
filing of a Form D with the SEC, and (iv) compliance with the state securities
laws or blue sky laws of applicable jurisdictions, the Company is not required
to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency or any regulatory or
self-regulatory agency in order for it to execute, deliver or perform any of its
obligations under this Agreement or to perform its obligations in accordance
with the terms hereof. The Common Stock is listed on The NASDAQ Stock Market,
the Company is not in violation of the listing requirements of The NASDAQ Stock
Market and the Company is not aware of any fact (including any proceedings
pending or, to the best of the Company's knowledge, contemplated) that could
result in the Common Stock being delisted from The NASDAQ Stock Market. The
Company is not aware of any fact that could result in a refusal by The NASDAQ
Stock Market to approve the Conversion Shares for listing.
3.6 SEC Documents. Except as disclosed in Schedule 3.6, since December
31, 1996, the Company has timely filed all reports, schedules, forms, statements
and other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the Securities Exchange Act of 1934 (the "Exchange
Act") (all of the foregoing filed after December 31, 1995 and all exhibits
included therein and financial statements and schedules thereto and documents
incorporated by reference therein, being referred to herein as the "SEC
Documents"). The Company has delivered to each Purchaser true and complete
copies of the Furnished SEC Documents, except for exhibits, schedules and
incorporated documents. Each of the SEC Documents as originally filed or as
amended complied in all material respects with the requirements of its
respective report or form and did not on the date of filing contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and as of the date
hereof, there is no fact or facts not disclosed in the SEC Documents which
relate specifically to the Company which individually or in the aggregate, may
have a Material Adverse Effect. The consolidated financial statements of the
Company (including any related schedules or notes thereto) included in the SEC
Documents were prepared in accordance with generally accepted accounting
principles, consistently applied, and the applicable rules and regulations of
the SEC during the periods involved (except (i) as may be otherwise indicated in
such financial statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they do not include footnotes or are condensed
or summary statements) and present accurately and completely, in all material
respects, the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal, year-end audit adjustments). To the
extent required by the rules of the SEC applicable thereto, the SEC Documents
contain a complete and accurate list of all material undischarged written or
oral contracts, agreements, leases or other instruments to which the Company or
any subsidiary is a party or by which the Company or any subsidiary is bound or
to which any of the properties or assets of the Company or any subsidiary is
subject (each a "Material Contract"). Except as set forth in Schedule 3.6, none
of the Company, its subsidiaries or, to the best knowledge of the Company, any
of the other parties thereto, is in breach or violation of any Material
Contract, which breach or violation would have a Material Adverse Effect. To the
best knowledge of the Company, no event, occurrence or condition exists which,
with the lapse of time, the giving of notice, or both, would become a default by
the Company or its subsidiaries thereunder which would have a Material Adverse
Effect. Except as set forth in Schedule 3.6, there are no liabilities or
obligations (whether accrued, absolute, contingent, unliquidated or otherwise,
whether due or to become due and regardless of when asserted), except (i)
liabilities and obligations in the respective amounts reserved against in the
Company's balance sheet or the footnotes thereto as of December 31, 1997
included in the Furnished SEC Documents, (ii) liabilities and obligations
incurred after December 31, 1997 in the ordinary course of business consistent
(in amount and kind) with past practice (none of which is a liability resulting
from breach of contract breach of warranty, tort, infringement, claim or
lawsuit) and that do not exceed $25,000 in the aggregate, (iii) liabilities and
obligations disclosed in the Furnished SEC Documents, and (iv) liabilities and
obligations which would not individually or in the aggregate, have a Material
Adverse Effect. Since December 31, 1997, the Company has operated its business
only in the ordinary course and there has not been individually or in the
aggregate, any change that would have a Material Adverse Effect (a "Material
Adverse Change") other than changes disclosed in the SEC Documents or otherwise
set forth in Schedule 3.6. The financial projections furnished by the Company to
the Purchasers, dated as of May 4, 1998 were prepared by the Company in good
faith based on (i) the best available information to management, and (ii) the
assumptions reflected in such projections. From the date of such projections
through the Closing Date, there has not occurred any events or circumstances
which would cause such projections to materially change as of the Closing Date.
Purchasers acknowledge that such projections (i) were not updated from the date
on which such projections were prepared and such projections do not reflect the
effects of the transactions contemplated by this Agreement or the effects of the
Company's private placement of its Series C Convertible Participating Preferred
Stock which was closed on June 5, 1998, and (ii) contain forward looking
statements and assumptions regarding future events and future performance of the
Company which involve risk and uncertainties that could materially effect actual
results of the Company's operations.
3.7 Absence of Certain Changes. Except as disclosed in Schedule 3.7,
since December 31, 1997, the business of the Company and its subsidiaries has
been conducted in the ordinary course, consistent with past practice and there
has not been (a) any Material Adverse Change, nor has any event or change
occurred which could reasonably result in a Material Adverse Change, in the
condition (financial or otherwise), results of operations, business, assets,
liabilities or prospects of the Company or its subsidiaries or any event or
condition which could reasonably be expected to have such a Material Adverse
Change, (b) any waiver or cancellation of any valuable right of the Company or
its subsidiaries, or the cancellation of any material debt or claim held by the
Company or its subsidiaries, (c) any payment, discharge or satisfaction of any
claim, liability or obligation of the Company or its subsidiaries other than in
the ordinary course of business except where such payment, discharge or
satisfaction would not, individually or in the aggregate, have a Material
Adverse Effect, (d) the placement of any Encumbrance upon the assets of the
Company or its subsidiaries other than any Permitted Encumbrance (as defined
herein), (e) any declaration or payment of dividends on, or other distribution
with respect to, or any direct or indirect redemption or acquisition of, any
securities of the Company, (f) any issuance of any stock, bonds or other
securities of the Company or its subsidiaries which is not disclosed in Schedule
3.3 or the Furnished SEC Documents, (g) any sale, assignment or transfer of any
tangible or intangible assets of the Company or its subsidiaries except in the
ordinary course of business, (h) any loan by the Company or its subsidiaries to
any officer, director, employee, consultant or shareholder of the Company or its
subsidiaries (other than advances to such persons in the ordinary course of
business in connection with travel and travel related expenses), (i) any damage,
destruction or loss (whether or not covered by insurance) materially and
adversely affecting the assets, property, condition (financial or otherwise),
results of operations or prospects of the Company or its subsidiaries, (j) any
increase, direct or indirect, in the compensation paid or payable to any officer
or director of the Company or its subsidiaries, other than in the ordinary
course of business, to any other employee, consultant or agent of the Company or
its subsidiaries, (k) any change in the accounting methods, practices or
policies of the Company or its subsidiaries, (l) any indebtedness incurred for
borrowed money by the Company or its subsidiaries other than in the ordinary
course of business, (m) any amendment to or termination of any material
agreement to which the Company or its subsidiaries is a party other than the
expiration of any such agreement in accordance with its terms or as disclosed in
the Furnished SEC Documents, (n) to the Company's knowledge, any change in the
laws or regulations governing the Company or its subsidiaries, (o) any Material
Adverse Change in the manner of business or operations of the Company or its
subsidiaries (including, without limitation, material accelerations or material
deferrals of the payment of accounts payable or other current liabilities or
material deferrals of the collection of accounts or notes receivable), (p) any
capital expenditures or commitments therefor by the Company or its subsidiaries
other than in the ordinary course of business, (q) any amendment of the articles
of incorporation, bylaws or other organizational documents of the Company or its
subsidiaries which is not disclosed in the Furnished SEC Documents, (r) any
material transaction entered into by the Company or its subsidiaries other than
in the ordinary course of business or any other material transactions entered
into by the Company or its subsidiaries whether or not in the ordinary course of
business which is not disclosed in the Furnished SEC Documents, or (s) any
agreement or commitment (contingent or otherwise) by the Company or its
subsidiaries to do any of the foregoing. For purposes of this Agreement,
"Permitted Encumbrance" shall mean (i) Encumbrances for unpaid taxes that either
(A) are not yet due and payable, or (B) for which a reserve with respect to such
obligation is established on the books of the Company, (ii) the interests of
lessors under operating leases and purchase money liens of lessors under capital
leases, (iii) Encumbrances arising by operation of law in favor of warehousemen,
landlords, carriers, mechanics, materialmen, laborers, or other similar
encumbrances in the ordinary course of business of the Company, (iv)
Encumbrances arising from deposits made in connection with obtaining worker's
compensation or other unemployment insurance, (v) with respect to any real
property, easements, rights of way, zoning and similar covenants and
restrictions, and similar Encumbrances and that do not individually or in the
aggregate materially impair the property of the Company, (vi) Encumbrances
resulting from any judgment or award that would not result in a Material Adverse
Change, and (vii) other Encumbrances which arise in the ordinary course of
business and which individually and in the aggregate do not materially impair
the Company's use of such property or its ability to obtain financing by using
such asset as collateral.
3.8 Absence of Litigation. Except as disclosed in Schedule 3.8 or as
disclosed in the Furnished SEC Documents, there is no civil, criminal or
administrative action, suit, proceeding, inquiry, claim, notices, hearing or
investigation at law or in equity (a "Litigation") before or by any court,
arbitrator or similar panel, public board, government agency, or self-regulatory
organization or body pending or, to the knowledge of the Company or any of its
subsidiaries, threatened against or affecting the Company, any of its
subsidiaries, or any of their respective assets (including Intangibles (as
defined herein)) or directors or officers in their capacities as such. There are
no facts known to the Company which, if known by a potential claimant or
governmental authority, could give rise to a claim or proceeding which, if
asserted or conducted with results unfavorable to the Company or any of its
subsidiaries, could reasonably be expected to have a Material Adverse Effect.
Except as set forth in Schedule 3.8, neither the Company nor its subsidiaries is
subject to any order, writ, injunction or decree of any court of any federal,
state, municipal or other domestic or foreign governmental department,
commission, board, bureau, agency or instrumentality which could have a Material
Adverse Effect.
3.9 Disclosure. Neither this Agreement, the SEC Documents nor any
certificate, instrument or written statement furnished or made to the Purchasers
by or on behalf of the Company in connection with this Agreement or the
Ancillary Documents contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained herein
and therein not misleading. There is no fact which is not disclosed in the
Furnished SEC Documents or fact which the Company has not disclosed to the
Purchasers or their counsel and of which the Company is aware which materially
and adversely affects, or which could materially and adversely affect, the
Company or its subsidiaries or the business, financial condition, operations,
property, affairs or prospects of the Company or its subsidiaries or the ability
of the Company or its subsidiaries to perform its obligations under the
Agreement or any of the Ancillary Documents.
3.10 S-3 Registration. The Company is currently eligible to register
the resale of the Conversion Shares by the Purchasers pursuant to a registration
statement on Form S-3 under the Securities Act.
3.11 No General Solicitation. Neither the Company nor any person acting
for the Company has conducted any "general solicitation," as described in Rule
502(c) under Regulation D, with respect to any of the Securities being offered
hereby.
3.12 No Integrated Offering. Neither the Company, nor any of its
Affiliates (as defined herein), nor any person acting on its or their behalf,
has directly or indirectly made any offers or sales of any security or solicited
any offers to buy any security under circumstances that would prevent the
parties hereto from consummating the transactions contemplated hereby pursuant
to an exemption from registration under the Securities Act pursuant to the
provisions of Regulation D. The transactions contemplated hereby are exempt from
the registration requirements of the Securities Act, assuming the accuracy of
the representations and warranties herein contained of each Purchaser. For
purposes hereof, "Affiliate" shall mean any entity controlling, controlled by or
under common control with a designated person or entity; for the purposes of
this definition, "control" shall have the meaning presently specified for that
word in Rule 405 promulgated by the SEC under the Securities Act. With respect
to any entity which is a limited partnership, Affiliate shall also mean any
general or limited partner of such limited partnership, or any person or entity
which is a general partner in a general or limited partnership which is a
general partner of such limited partnership.
3.13 No Brokers. The Company has taken no action which would give rise
to any claim by any person for brokerage commissions, finder's fees or similar
payments by the Purchasers relating to this Agreement or the transactions
contemplated hereby.
3.14 Intellectual Property. Each of the Company and its subsidiaries
owns or possesses adequate and enforceable rights to use all material patents,
patent applications, trademarks, trademark applications, trade names, service
marks, copyrights, copyright applications, licenses, know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures) and other similar rights and proprietary
knowledge (collectively, "Intangibles") used or necessary for the conduct of its
business as now being conducted and as described in the Company's Annual Report
on Form 10-K and Form 10-K/A for its most recently ended fiscal year. To the
Company's knowledge, neither the Company nor any subsidiary of the Company
infringes on or is in conflict with any right of any other person with respect
to any Intangibles nor is there any claim of infringement made by a third party
against or involving the Company or any of its subsidiaries, which infringement,
conflict or claim, individually or in the aggregate, could reasonably be
expected to result in an unfavorable decision, ruling or finding which would
have a Material Adverse Effect.
3.15 Employee Benefit Plans.
(a) Identification. Schedule 3.15(a) contains a complete and
accurate list of all employee benefit plans (within the meaning of Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
sponsored by the Company or to which the Company contributes on behalf of its
employees (the "Employee Benefit Plans") and each employment, severance or
change in control agreement to which the Company is a party. The Company has
provided or made available to the Purchasers copies of all plan documents,
determination letters, pending determination letter applications, VCR Submission
(as defined below), trust instruments, insurance contracts, administrative
services contracts, annual reports, actuarial valuations, summary plan
descriptions, summaries of material modifications, administrative forms and
other documents that constitute a part of or are incident to the administration
of the Employee Benefit Plans. In addition, the Company has provided or made
available to the Purchasers a written description of all existing practices
engaged in by the Company that constitute Employee Benefit Plans. Except as set
forth on Schedule 3.15(a) and subject to the requirements of the Internal
Revenue Code of 1986, as amended (the "Code") and ERISA, each of the Employee
Benefit Plans can be terminated or amended (without material cost to the
Company) at will by the Company. Except as set forth on Schedule 3.15(a), no
unwritten amendment exists with respect to any Employee Benefit Plan. The
Company has no plan or commitment, whether legally binding or not, to establish
any new Employee Benefit Plan, to enter into any employment severance or change
in control agreement or to modify or to terminate any Employee Benefit Plan or
agreement.
(b) Administration. Each Employee Benefit Plan has been
administered and maintained in compliance with all applicable laws, rules and
regulations, except where the failure to be in compliance would not,
individually or in the aggregate, result in a Material Adverse Effect. To the
best of the knowledge of the Company, the Company has (i) made all necessary
filings with respect to such Employee Benefit Plans, including the timely filing
of Form 5500 if applicable, and (ii) made all necessary filings, reports and
disclosures pursuant to and have complied with all requirements of the Internal
Revenue Service ("IRS") Voluntary Compliance Resolution Program ("VCR
Submission"), if applicable, with respect to all profit sharing retirement plans
and pension plans in which employees of the Company participate.
(c) Examinations. Except as set forth on Schedule 3.15(c), the
Company has not received any notice that any Employee Benefit Plan is currently
the subject of an audit, investigation, enforcement action or other similar
proceeding conducted by any state or federal agency.
(d) Prohibited Transactions. To the best of the knowledge of
the Company, no prohibited transactions (within the meaning of Section 4975 of
the Code or Sections 406 and 407 of ERISA) have occurred with respect to any
Employee Benefit Plans.
(e) Claims and Litigation. No pending or, to the actual
knowledge of the Company, threatened claims, suits, or other proceedings exist
with respect to any Employee Benefit Plan other than normal benefit claims filed
by participants or beneficiaries.
(f) Qualification. As set forth in more detail on Schedule
3.15(f), the Company has applied a favorable determination letter or ruling from
the IRS for each of the Employee Benefit Plans intended to be qualified within
the meaning of Section 401(a) of the Code and/or tax-exempt within the meaning
of Section 501(a) of the Code. Except as set forth on Schedule 3.15(f), no
proceedings exist or, to the actual knowledge of the Company has been threatened
that could result in the revocation of any such favorable determination letter
or ruling.
(g) Funding Status. Neither the Company nor any member of a
"Controlled Group" (within the meaning of Section 412(n)(6)(B) of the Code) with
the Company sponsors any plans which (i) are subject to the minimum funding
requirements of Code Section 412 or ERISA Section 302, or (ii) are subject to
Title IV of ERISA assumptions.
(h) Excise Taxes. To the best of the knowledge of the
Company, neither the Company nor any member of a Controlled Group has any
liability to pay excise taxes with respect to any Employee Benefit Plan under
applicable provisions of the Code or ERISA.
(i) Multi-employer Plans. Neither the Company nor any member
of a Controlled Group is or ever has been obligated to contribute to a
multi-employer plan within the meaning of Section 3(37) of ERISA and neither the
Company nor the Controlled Group has ever contributed to any plan subject to
Title IV of ERISA.
(j) Pension Benefit Guaranty Corporation. None of the
Employee Benefit Plans are subject to the requirements of Title IV of ERISA.
(k) Retirees. The Company has no obligation or commitment to
provide medical, dental or life insurance benefits to or on behalf of any of its
employees who may retire or any of its former employees who have retired except
as may be required pursuant to the continuation of coverage provisions of
Section 4980B of the Code and Sections 601 through 608 of ERISA.
(l) Change in Control. The execution of, and performance of
the transactions contemplated in, this Agreement will not (either alone or upon
the occurrence of any additional or subsequent events) constitute an event under
an Employee Benefit Plan or employment, severance or change in control agreement
that will or may result in any, payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any employee of the
Company. No payment or benefit which will or may be made by the Company, any of
its subsidiaries, Purchasers or any of their respective affiliates by reason of
such execution or performance may be characterized as an "excess parachute
payment," within the meaning of Section 28OG(b)(1) of the Code or which will not
be deductible for federal tax purposes by virtue of Section 162(m) of the Code.
(m) Insurance. With respect to each Employee Benefit Plan
which is an employee welfare benefit plan (within the meaning of Section 3(l) of
ERISA), all claims incurred by the Company are (i) insured pursuant to a
contract of insurance whereby the insurance company bears any risk of loss with
respect to such claims, or (ii) covered under a contract with a health
maintenance organization which bears the liability for claims.
(n) Labor Disputes. No work stoppage or labor strike against
the Company is pending or threatened. The Company is not now, nor has been in
the past (i) involved in or threatened with any labor dispute, grievance, or
litigation relating to labor matters, including, without limitation, violation
of any federal, state or local labor, safety or employment laws (domestic or
foreign), charges of unfair labor practices or discrimination complaints which
could have a Material Adverse Effect; (ii) engaged in any unfair labor practices
within the meaning of the National Labor Relations Act or the Railway Labor Act,
or (iii) a party to, or bound by, any collective bargaining agreement or union
contract and no such agreement or contract is currently being negotiated by the
Company or any of its affiliates. No employees of the Company are currently
represented by any labor union for purposes of collective bargaining and no
activities the purpose of which is to achieve such representation are threatened
or ongoing. The Company (i) is in compliance with all applicable federal, state
and local laws, rules and regulations (domestic and foreign) respecting
employment, employment practices, labor, terms and conditions of employment and
wages and hours, except for such possible non-compliance as would not,
individually or in the aggregate, have a Material Adverse Effect; (ii) has
withheld all amounts required by law or by agreement to be withheld from the
wages, salaries and other payments; (iii) is not liable for any arrears of wages
or any taxes or any penalty for failure to comply with any of the foregoing; and
(iv) is not liable for any payment to any trust or other fund or to any
governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other benefits.
3.16 Agreements.
(a) Except as set forth on Schedule 3.16, the Company or its
subsidiaries are not a party to, and are not bound or subject to, any indenture,
mortgage, guaranty, lease, license or other contract, agreement or
understanding, written or oral (a "Contract"), other than any Contract which (i)
pursuant to its terms, has expired, been terminated or fully performed by the
parties, and in each case, under which the Company and its subsidiaries have no
liability, contingent or otherwise, or (ii) involves monthly payments to or from
the Company and/or its subsidiaries (as opposed to an indemnity agreement or
similar contract under which a party is not required to make fixed monthly
payments) which monthly payments do not aggregate on an annual basis to $150,000
or more, and in each case, is not material to the business, condition (financial
or otherwise) or, operations of the Company or its subsidiaries.
(b) Each of such Contracts is, as of the date hereof, and will
continue after the Closing to be, legal, valid, binding and in full force and
effect and enforceable in accordance with its terms. There is no breach,
violation or default by the Company (or, to the best knowledge of the Company,
any other party) under any such Contract except where such breach, violation or
default would not, individually or in the aggregate, have a Material Adverse
Effect, and no event (including, without limitation, the consummation of the
transactions contemplated by this Agreement) which, with notice or lapse of time
or both, would (A) constitute a breach, violation or default by the Company (or,
to the best knowledge of the Company, any other party) under any such Contract
except where such breach, violation or default would not, individually or in the
aggregate, have a Material Adverse Effect, or (B) to the best knowledge of the
Company give rise to any lien or right of termination, modification,
cancellation, prepayment, suspension, limitation, revocation or acceleration
against the Company under any such Contract. Except as set forth on Schedule
3.16, the Company is not or, to the knowledge of the Company, no other party to
any of such Contracts (i) is in arrears in respect of the performance or
satisfaction of the terms and conditions on its part to be performed or
satisfied under any of such Contracts or (ii) has granted or has been granted
any waiver or indulgence under any of such Contracts or has repudiated any
provision thereof.
3.17 Equity Investments; Subsidiaries. Set forth on Schedule 3.17 is a
list of all of the Company's subsidiaries. Except as set forth on Schedule 3.17,
the Company does not own, whether directly or indirectly, any capital stock or
other proprietary interest directly or indirectly, in any corporation,
association, trust, partnership, joint venture or other entity which is
currently involved in the Company's ordinary course of business.
3.18 Title to Assets and Properties; Insurance.
(a) The Company has good and marketable title, or a valid
leasehold interest in or contractual right to use, all of its assets and
properties, free and clear of any mortgages, judgments, claims liens, security
interests, pledges, escrows, charges or other encumbrances of any kind or
character whatsoever ("Encumbrances") except in each case for Permitted
Encumbrances and such defects in title and such other liens and Encumbrances
which do not individually or in the aggregate materially detract from the value
to the Company of the properties and assets of the Company and its subsidiaries
taken as a whole.
(b) The Company and its subsidiaries maintain insurance
(including D&O insurance) in such amounts (to the extent available in the public
market), including self-insurance, retainage and deductible arrangements, and of
such a character as is reasonable for companies engaged in the same or similar
business. Schedule 3.18(b) sets forth a list of all insurance coverage carried
by the business and/or the Company, the carrier and terms and amount of
coverage.
3.19 Compliance with Laws; Permits. Except as provided in Schedule
3.19, the Company and its subsidiaries are in compliance, and have been
conducted in compliance with, all federal, state, local and foreign laws, rules,
ordinances, codes, consents, authorizations, registrations, regulations,
decrees, directives, judgments and orders applicable to it except where the
failure to comply would not individually or in the aggregate have a Material
Adverse Effect. The Company has all federal, state, local and foreign
governmental licenses, permits, qualifications and authorizations ("Permits")
necessary in the conduct of its business as currently conducted. All such
Permits are in full force and effect and no violations have been recorded in
respect of any such Permit; no proceeding is pending or, to the best knowledge
of the Company, threatened to revoke or limit any such Permit and no such Permit
will be suspended, cancelled or adversely modified as a result of the execution
and delivery of this Agreement or the Ancillary Documents and the consummation
of the transactions contemplated hereby or thereby, except where failure to have
such Permit would not individually or in the aggregate have a Material Adverse
Effect.
3.20 Taxes.
(a) For purposes of this Agreement, (i) "Taxes" shall mean all
taxes, assessments, charges, duties, fees, levies or other governmental charges
(including interest, penalties or additions associated therewith) (including,
without limitation, federal, state, city, county, local, foreign, or other
income, franchise, ad valorem, value added, excise, real or personal property,
asset, franchise taxes withheld, capital, withholding, real or tangible
property, employment, unemployment compensation, transfer, sales, use, excise
and all other taxes of any kind whatsoever imposed by the United States or any
state, city, country, country or foreign government or subdivision or agency
thereof, whether disputed or not, and (ii) "Transaction" means one or more
transactions, acts, events, or omissions of whatever nature.
(b) The Company has filed on a timely basis all returns and
reports, including all estimated returns and reports of every kind and have
timely given all notices, in respect of Taxes required to be filed or given
under applicable law within the application statute of limitations period by any
of them, or except where proper action has been taken by the Company to extend
the relevant filing deadline. Such returns, reports and notices are complete and
accurate in all material respects. All Taxes shown on such returns or reports
have been, and all Taxes subsequently assessed with respect to the periods and
or Transactions to which such returns or reports relate have been or will be,
timely, and fully paid, except for amounts which the Company is contesting in
good faith. The provisions in the financial statements (and the notes and
schedules related thereto) contained in the Furnished SEC Documents for Taxes
currently payable and for deferred Taxes are adequate in all material respects
to provide for such Taxes for which the Company and its Subsidiaries taken as a
whole may be liable in respect of periods or Transactions through the dates
thereof.
(c) No fact or condition relating to any past or present
Transaction, except as set forth in the Company Disclosure Schedule, which, if
known to any tax authority having jurisdiction, would likely result in a
successful challenge by such authority of the treatment or omission of such
factor or condition on any tax return, report or notice of the Company or its
Subsidiaries, and no issue has arisen in any examination of the Company by the
IRS that, in either case, if raised with respect to any other period no so
examined would result in a proposed material deficiency for any other period not
so examined, if upheld. The Company and its Subsidiaries have made all payments
or estimated Taxes required to be made under Section 6655 of the Code and any
comparable provisions of state, local or foreign law. Except as set forth on
Schedule 3.20, there is no pending nor, to the Company's knowledge, threatened
or contemplated action, audit, proceeding or investigation for the assessment or
collection of Taxes from the Company. There are no requests for rulings,
outstanding subpoenas or requests for information with respect to Taxes of the
Company, proposed reassessments of any property owned or leased by the Company,
or similar matters pending with respect to any taxing authority.
3.21 Environmental Matters. Except as listed in Schedule 3.21:
(a) There are, with respect to the Company and its
subsidiaries, or any predecessor of the foregoing, no present violations of
Environmental Law (as defined herein), any actions, activities, circumstances,
conditions, events, incidents, or contractual obligations which may give rise to
any liability of the Company pursuant to any Environmental Law and neither the
Company nor its subsidiaries has received any notice with respect to any of the
foregoing nor is any Litigation pending or threatened in connection with any of
the foregoing.
(b) To the knowledge of the Company and except in the normal
course of the Company's or its subsidiaries' business, (i) no Hazardous
Materials are present on or about any real property currently owned, leased or
used by the Company or its subsidiaries, and (ii) no Hazardous Materials were
present on or about any real property previously owned, leased or used by the
Company or its subsidiaries during the period the property was owned, leased or
used by the Company or its subsidiaries.
(c) To the knowledge of the Company, no Hazardous Materials
have been released on or about, or where they may pose a threat of migration to,
any real property currently owned, leased or used by the Company or its
subsidiaries and no Hazardous Materials were released on or about any real
property previously owned, leased or used by the Company or its subsidiaries
during the period the property was owned, leased or used by the Company or its
subsidiaries, except as may be required in the normal course of business and in
material compliance with applicable Environmental Law.
(d) To the knowledge of the Company, no asbestos-containing
materials or PCBs are present on or about any property currently owned, leased
or used by the Company or its subsidiaries.
(e) To the knowledge of the Company, there are not now, nor
have there ever been, any underground storage tanks or similar facilities of any
kind on or under any real property currently or previously owned, leased or used
by the Company or its subsidiaries.
(f) For purposes of this Section 3.21, capitalized terms used
herein shall have The following meanings:
"Environmental Laws" shall mean, at any date, all provisions
of federal, state, local or foreign law (including applicable principles of
common and civil law), statutes, ordinances, rules, regulations, published
standards and directives that have the force and effect of laws, statutes,
regulations, permits, licenses, judgments, writs, injunctions, decrees and
orders enacted, promulgated or issued by an), Public Authority, and all
indemnity agreements and other contractual obligations, as in effect at such
date, relating to (i) the protection of the environment, including the air,
surface and subsurface soils, surface waters, groundwaters and natural
resources, and (ii) occupational health and safety and exposure of persons to
Hazardous Materials. Environmental Laws shall include the Comprehensive
Environmental Response, Compensation and Liability Act 42 U.S.C. ss.ss.9601 et
seq., and any other laws imposing or creating liability with respect to
Hazardous Materials.
"Environmental Liability" shall mean any liabilities,
obligations, costs, losses, payments or damages, including compensatory and
punitive damages, incurred (i) to contain, remove, clean up, assess, xxxxx or
otherwise remedy any actual or alleged release or threatened release of
Hazardous Materials, any actual or alleged contamination (by Hazardous
Materials) of air, surface or subsurface soil, groundwater or surface water, or
any personal injury or damage to natural resources or property resulting from
any such release or contamination, pursuant to the requirements of any
Environmental Law or in response to any claim by any Public Authority or other
third party under any Environmental Law; (ii) to modify facilities or processes
or take any other remedial action in response to any claim by any Public
Authority of non-compliance with any Environmental Law, (iii) as a result of the
imposition of any civil or criminal fine or penalty by any Public Authority for
the violation or alleged violation of any Environmental Law, or (iv) as a result
of any action, suit, proceeding or claim by any third party under any
Environmental Law. The term "Environmental Liability" shall include: (i)
reasonable fees of counsel and consultants (but not any corporate allocation for
management time or for the use of similar in-house services or facilities) and
(ii) the costs and expenses of any investigation undertaken to ascertain the
existence or extent of any potential or actual Environmental Liability.
"Hazardous Material" shall mean any substance regulated by any
Environmental Law or which may now or in the future form the basis for any
Environmental Liability.
"Public Authority" shall mean any supranational, national,
regional, state or local government court, governmental agency, authority,
board, bureau, instrumentality or regulatory body.
3.22 Suppliers and Customers. The Company does not have any knowledge
of any termination, cancellation or threatened termination or cancellation or
limitation of, or any material modification or change in, or expressed material
dissatisfaction with the business relationship between the Company or its
subsidiaries and any supplier or vendor of the Company or its subsidiaries, in
each case, of materials or services in an amount in excess of [$50,000] per
year.
3.23 Holding Company Act and Investment Company Act. Neither the
Company nor its subsidiaries is: (i) a "public utility company" or a "holding
company," or an "affiliate" or a "subsidiary company" of a "holding company," or
an "affiliate" of such a "subsidiary company," as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended, or (ii) a "public
utility," as defined in the Federal Power Act, as amended, or (iii) an
"investment company" or an "affiliated person" thereof or an "affiliated person"
of any such "affiliated person," as such terms are defined in the Investment
Company Act of 1940, as amended.
3.24 Foreign Corrupt Practices. To the Company's best knowledge, the
Company has no notice and neither the Company, nor any of its subsidiaries, nor
any director, officer, agent, employee or other person acting on behalf of the
Company or any subsidiary has violated or is in violation of any provision of
the U.S. Foreign Corrupt Practices Act of 1977, as amended. To the Company's
best knowledge, the Company has no notice and neither the Company, nor any of
its subsidiaries, nor any director, officer, agent, employee or other person
acting on behalf of the Company or any subsidiary has, in the course of his
actions or, on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity, made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; or made any
bribe, rebate, payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee.
3.25 Accounts Receivable. The accounts receivable of the Company and
its subsidiaries reflected in the SEC Documents, to the extent uncollected on
the date hereof, are, and the accounts receivable of the Company and the
subsidiaries relating to the operation of the Company to be reflected on the
books of the Company on the Closing Date (the "Accounts Receivable") will be, in
all material respects, valid, existing and collectible (taking into
consideration the allowance for sales returns and doubtful accounts set forth in
the financial statements) using reasonably diligent collection methods taking
into account the size and nature of the receivable, and represents amounts due
for goods sold and delivered or services performed. There are not, and on the
date of Closing there will not be, any material refunds, discounts, set-offs,
defenses, counterclaims or other adjustments payable or assessable with respect
to the Accounts Receivable.
3.26 Series B Preferred Stock. As of the date hereof, there are no
outstanding shares of the Corporation's Series B Convertible Participating
Preferred Stock ("Series B Preferred Stock") and no obligation to issue Series B
Preferred Stock exists.
3.27 Foothill Capital Corporation. As of the date hereof, the Company
has paid all amounts owed to Foothill Capital Corporation.
ARTICLE 4
COVENANTS
4.1 Best Efforts. The parties shall use their best efforts timely to
satisfy each of the conditions described in Articles 6 and 7 of this Agreement.
4.2 Securities Laws. The Company shall file a Form D with respect to
the Securities with the SEC as required under Regulation D and shall provide a
copy thereof to each Purchaser within 15 days after the Closing Date. The
Company shall file a Form 8-K disclosing this Agreement and the transactions
contemplated hereby with the SEC within five business days following the Closing
Date. The Company shall, on or prior to the Closing Date, take such action as is
necessary to sell the Securities to each Purchaser under applicable securities
laws of the states of the United States, and shall provide evidence of any such
action so taken to each Purchaser on or prior to the Closing Date.
4.3 Reporting Status. So long as any Purchaser beneficially owns any of
the Securities, the Company shall use its best efforts to timely file all
reports required to be filed by it with the SEC pursuant to the Exchange Act,
and make and keep public information available as those terms are defined in
Rule 144 and the Company shall not terminate its status as an issuer required to
file reports under the Exchange Act even if the Exchange Act or the rules and
regulations thereunder would permit such termination.
4.4 Use of Proceeds. The Company shall use the Purchase Price to
facilitate the implementation of its strategic plan (e.g., the acquisition of
related technology through asset and business acquisitions, mergers and joint
ventures) and other general corporate purposes.
4.5 Future Financings.
(a) During the period commencing on the Closing Date and
continuing for a period of six months immediately thereafter (the "Future
Financing Period"), the Company will not enter into any agreement ("Financing
Agreement") with an investor which includes the issuance of equity securities,
or any security convertible into or exercisable, directly or indirectly, for
equity securities of the Company (collectively, the "Equity Securities") on
terms materially more favorable than those given to the Purchasers. For purposes
of this Section 4.5, terms will be deemed materially more favorable than the
terms given to the Purchasers if without the prior written consent of each of
the Purchasers (i) the Equity Securities related to the Financing Agreement are
issued at less than the Dilutive Issue Price (as defined in the Certificate of
Designation), or (ii) the Financing Agreement grants the investor non-monetary
rights (e.g., registration rights, voting rights or other corporate governance
rights) which are materially greater or more favorable than those granted to
Purchasers, taking into consideration all relevant factors.
(b) If during the Future Financing Period the Company should
enter into a Financing Agreement with an investor on terms which are materially
more favorable to such investor than the terms which have been provided to the
Purchasers, the Company will remedy such situation so that the terms of the
investment contemplated by this Agreement will be amended to reflect such more
favorable terms, including the Company's issuance of additional Common Stock,
preferred stock or warrants (as may be agreed to by the parties and not
inconsistent with (i) the Delaware General Corporation Law, (ii) the listing
rules of The NASDAQ Stock Market, or (iii) the rules and regulations of the SEC)
if necessary to accomplish the foregoing. Purchasers acknowledge that
adjustments to the Conversion Ratio (as defined in the Certificate of
Designation) pursuant to Section 6(e)(ii) of the Certificate of Designation
shall be considered when determining if the Company has satisfied its
obligations under this Section 4.5.
(c) The obligations under this Section 4.5 shall expire and be
of no further force or effect at the conclusion of the Future Financing Period.
For purposes of this Section 4.5, the following will not be deemed a "Financing
Agreement" (collectively, the "Excluded Securities"): (i) a public offering of
the Company's securities, (ii) the grant of options or warrants, or the issuance
of securities, under any employee or director stock option, stock purchase or
restricted stock plan of the Company, (iii) the issuance of Common Stock
pursuant to any contingent obligation of the Company existing as of the Closing
and described on Schedule 3.3, (iv) the issuance of securities upon the exercise
or conversion of the Company's options, warrants or other convertible securities
outstanding as of the date hereof, (v) declaration of a rights dividend to
holders of Common Stock in connection with the adoption of a Stockholder Rights
Plan by the Company, (vi) the issuance of securities in connection with a
merger, acquisition, joint venture or similar arrangement which was approved by
majority of the Company's Board of Directors that are not employees of the
Company ("Outside Directors"), and (vii) the issuance of securities in
connection with the establishment of a strategic relationship which is approved
by a majority of the Outside Directors.
4.6 Rights of First Offer.
(a) During the period commencing on the Closing Date and
continuing until the first to occur of (such date will be referred to as the
"RFR Period"): (i) the expiration of the three year period immediately after the
Closing Date, or (ii) Purchasers cease to own in the aggregate at least 5% of
the Common Stock outstanding, prior to seeking (for purposes of this
calculation, all shares of Preferred Stock will be deemed to be converted to
shares of Common Stock pursuant to the terms of the Certificate of Designation),
financing from any third party consisting of an issuance by the Company of
Equity Securities (the "Proposed Offering"), the Company shall provide written
notice to the Purchasers (the "Proposed Offering Notice"), such notice to
include a description in reasonable detail of the Proposed Offering including
the type and amount of securities proposed to be issued and the consideration
the Company desires to receive therefor. The Proposed Offering Notice shall
constitute an offer to the Purchasers to purchase a portion (a "Maintenance
Amount") of the securities being offered (the "Offered Securities") in
connection with the Proposed Offering on a pari passu basis in order to maintain
the Purchasers' percentage level of ownership of the Company's Common Stock
outstanding as such ownership exists on the date of the Proposed Offering
Notice.
(b) The Purchasers shall have 10 business days after receipt
of the Proposed Offering Notice (unless the Purchasers earlier indicate that
they have no interest in purchasing the Offered Securities), to decide whether
or not to acquire the Maintenance Amount, after which (if the Purchasers have
not agreed to purchase the above-mentioned Maintenance Amount on the terms set
forth in the Proposed Offering Notice or such other terms as are mutually
acceptable to the Company and the Purchasers) the Company shall be permitted to
seek and obtain a third-party purchaser to acquire the entire amount of the
Offered Securities, provided that the closing of such acquisition by such third
party purchaser occurs within 90 days from the date of the Proposed Offering
Notice and provided that the acquisition of the Offered Securities by such
third-party purchaser is on terms no more favorable to such third-party
purchaser than those terms set forth in the Proposed Offering Notice.
(c) For purposes of this Section 4.6, the issuance of Excluded
Securities will not be deemed a "Proposed Offering".
4.7 Expenses.
(a) Except as set forth in this Section 4.7, the Company and
each Purchaser shall pay all the costs and expenses incurred by it or on its
behalf in connection with this Agreement and the consummation of the
transactions contemplated hereby.
(b) Within 15 business days from the receipt of a billing
statement from Purchasers, the Company shall pay and shall reimburse Purchasers
for all of Purchasers reasonable documented out-of-pocket costs and expenses
incurred in connection with this transaction, including, without limitation, the
fees and expenses of counsel retained by Purchasers in connection with the
negotiation and preparation of this Agreement and agreements related hereto and
the consummation of the transactions contemplated hereby and thereby; provided,
however, in no event shall the liability of the Company under this Section 4.7
in the aggregate exceed $50,000.
4.8 Corporate Governance.
(a) Board Representation. If the Purchasers are no longer able
to appoint and elect a member of the Company's Board of Directors (the "Board")
pursuant to the terms of the Certificate of Designation, but the Purchasers (and
entities which are affiliated with the general partner of any Purchaser) in the
aggregate own at least 7.5% of the Common Stock outstanding on any date the
Board fixes the record date for a meeting of the Company's stockholders at which
directors will be elected (for purposes of this calculation all shares of
Preferred Stock shall be deemed to be converted to shares of Common Stock
pursuant to the terms of the Certificate of Designation), then the Purchasers
shall have the right to designate a nominee (who is reasonably acceptable to the
Board) to stand for election as a director at the next meeting of the Company's
stockholders at which directors will be elected. The Purchasers shall submit to
the Board all information related to such reasonably acceptable nominee as would
be required by Regulation 14A promulgated by the SEC under the Exchange Act to
be included in a proxy statement related to a meeting of the Company's
stockholders at which directors would be elected. If the Purchaser's nominee is
elected but such nominee does not serve such nominee's complete term on the
Board by reason of the resignation, death, removal or inability to serve, then
Purchasers shall be entitled to designate a successor (who is reasonably
acceptable to the Board) to fill such vacancy until the next meeting for the
election of directors. If the Purchasers' nominee is not elected to the Board,
the Purchasers will, in addition to those rights set forth in Section 4.8(b)
below, be entitled to appoint an additional Non-Voting Observer (as defined in
Section 4.8(b)). The Company's obligations, and the Purchasers' rights, under
this Section 4.8(a) shall cease upon Purchasers (and entities which are
affiliated with the general partner of any Purchaser) in the aggregate ceasing
to own at least 7.5% of the Common Stock outstanding on any date the Board fixes
the record date for a meeting of the Company's stockholders at which directors
will be elected (for purposes of this calculation all shares of Preferred Stock
shall be deemed to be converted to shares of Common Stock pursuant to the terms
of the Certificate of Designation). For purposes of this paragraph 4.8(a), the
phrase "Common Stock outstanding" shall mean the Common Stock shown as
outstanding on the Company's Quarterly Report on Form 10-Q for the most recent
quarter and shall not be determined on a dilutive basis.
(b) Non-Voting Observer; Other Matters.
(i) If the member of the Board appointed by the
Purchasers pursuant to the Certificate of Designation or in accordance with
Section 4.8(a), assuming such nominee is elected to the Board (the "Pequot
Nominee"), is not an employee of Dawson Samberg Capital Management, Inc., then
for as long as the Purchasers own in the aggregate at least 7.5% of the Common
Stock outstanding (for purposes of this calculation, all shares of Preferred
Stock shall be deemed to be converted to shares of Common Stock pursuant to the
terms of the Certificate of Designation) the Purchasers, collectively, shall
also be entitled to designate a non-voting observer (the "Non-Voting Observer")
to attend and participate in (but not to vote at) all meetings of the Board and
any committee thereof. The Non-Voting Observer shall have the same rights and
responsibilities with respect to the receipt of notices of meetings of the Board
or a committee thereof and access and limitations to information concerning the
business and operations of the Company as members of the Board, and shall be
entitled to participate in discussions and consult with the Board without
voting.
(ii) In addition to any requirements specified in
the Company's by-laws, the Company shall notify the Pequot Nominee and the
Non-Voting Observer, if applicable, by telecopy, of (a) every meeting (or action
by written consent) of the Board and (b) every meeting (or action by written
consent) of the board of directors of the subsidiaries and of any committee of
the Board or the board of directors of the subsidiaries, to the extent, in the
case of this clause (b), that the Pequot Nominee is on the board of directors of
the subsidiaries or is on such committee of the Board of the Company or the
subsidiaries, at the same time other members of such boards of directors or
committees are so notified.
(iii) The Company shall, upon request therefor,
promptly reimburse the Pequot Nominee and the Non-Voting Observer, if
applicable, for all reasonable expenses incurred by them in connection with
their attendance at meetings of the Board or of committees of the Board in
accordance with the procedures and policies utilized by the Company to reimburse
other members of the Board and committees of the Board. The foregoing shall be
in addition to, and not in lieu of (or in duplication of), any indemnification
or reimbursement obligations of the Company under the certificate of
incorporation or by-laws of the Company. The Non-Voting Observer shall be
entitled to indemnification from the Company to the maximum extent permitted by
law as though he or she were a director of the Company.
4.9 Listing. The Company shall use its best efforts to continue the
listing and trading of its Common Stock on The NASDAQ Stock Market, the New York
Stock Exchange or American Stock Exchange; and comply in all respects with the
Company's reporting, filing and other obligations under the by-laws or rules of
The NASDAQ Stock Market or such exchange, as applicable. As of the Closing the
Conversion Shares shall be approved for quotation on The NASDAQ Stock Market.
4.10 Prospectus Delivery Requirement. Each Purchaser understands that
the Securities Act requires delivery of a prospectus relating to the Securities
in connection with any sale or other disposition thereof pursuant to the
Registration Statement, and each Purchaser shall comply with the applicable
prospectus delivery requirements of the Securities Act in connection with any
such sale or other disposition.
4.11 Transactions with Affiliates. The Company will not, and will not
permit any subsidiaries to, engage in any transaction or group of related
transactions (including, without limitation, the purchase, lease, sale or
exchange of properties of any kind or the rendering of any service) with any
affiliate (other than the Company), except in the ordinary course and pursuant
to the reasonable requirements of the Company's or the subsidiaries' business
and upon fair and reasonable terms no less favorable to the Company or such
subsidiaries than would be obtainable in a comparable arm's-length transaction
with a person not an affiliate. The Company will not be deemed in default of
this Section 4.11 in connection with carrying out its obligations pursuant to
those agreements or transactions described in the Furnished SEC Documents.
4.12 Stockholders Rights Plan. Within 30 days after the Closing Date
the Board will implement a stockholders rights plan which would be triggered
should any investor acquire more than 15% of the Company's outstanding voting
securities without the approval of the Board.
ARTICLE 5
TRANSFER OF SECURITIES
The Securities shall not be transferable except upon the conditions
specified in this Article 5, which conditions are intended to insure compliance
with the provisions of the Securities Act and state securities laws in respect
of the transfer of any such Securities.
5.1 Restrictive Legend.
(a) Unless and until otherwise permitted by this Article 5,
each certificate for the Preferred Stock and the Conversion Shares issued to
Purchasers or to any subsequent transferee of such Shares shall be stamped or
otherwise imprinted with a legend in substantially the following form:
"These Shares have not been registered under the Securities
Act of 1933 and may not be offered for sale, sold, transferred
or otherwise disposed of unless registered under such Act or
unless an exemption from such registration is available.
Further, such transfer is subject to the conditions specified
in a Securities Purchase Agreement dated as of June 12, 1998
pursuant to which such shares were issued and sold by
LaserSight Incorporated (the "Company"), a copy of which
Agreement will be furnished by the Company to the holder
hereof upon request and without charge."
(b) The Company may order its transfer agent for the Common
Stock to stop the transfer of any of the Securities bearing the legend set forth
in Subsection (a) of this Section 5.1 until the conditions of this Article 5
with respect to the transfer of such Securities have been satisfied.
5.2 Notice of Proposed Transfer. If, prior to any transfer or sale of
any Securities, Purchaser desiring to effect such transfer or sale shall deliver
a written notice to the Company describing briefly the manner of such transfer
or sale and a written opinion of counsel for such Purchaser (provided that such
counsel, and the form and substance of such opinion, are reasonably satisfactory
to the Company) to the effect that such transfer or sale may be effected without
the registration of such Securities under the Securities Act, the Company shall
thereupon permit or cause its transfer agent to permit such transfer or sale to
be effected; provided, however, that if in such written notice the transferring
Purchaser represents and warrants to the Company that the transfer or sale is to
a purchaser or transferee whom the transferring Purchaser knows or reasonably
believes to be a "qualified institutional buyer," as that term is defined in
Rule 144A promulgated by the SEC under the Securities Act ("Rule 144A"), no
opinion shall be required unless reasonably requested in writing by the Company
within five days after receipt of such written notice, in which case such
Purchaser shall deliver to Company such a written opinion of counsel.
5.3 Termination of Restrictions.
(a) Notwithstanding the foregoing provisions of this Article
5, the restrictions imposed by this Article 5 upon the transferability of
Securities shall terminate as to any particular share of such Securities when
(i) such Security shall have been effectively registered under the Securities
Act and sold by Purchaser thereof in accordance with such registration, or (ii)
a written opinion to the effect that such restrictions are no longer required or
necessary under any federal or state securities law or regulation have been
received from counsel for Purchaser thereof (provided that such counsel, and the
form and substance of such opinion, are reasonably satisfactory to the Company)
or counsel for the Company, or (iii) such Security shall have been sold without
registration under the Securities Act in compliance with Rule 144, or (iv) the
Company is reasonably satisfied that Purchaser of such Security shall, in
accordance with the terms of Subsection (k) of Rule 144, be entitled to sell
such Security pursuant to such Subsection, or (v) a letter or an order shall
have been issued to Purchaser thereof by the staff of the SEC or the SEC stating
that no enforcement action shall be recommended by such staff or taken by the
SEC, as the case may be, if such Security is transferred without registration
under the Securities Act in accordance with the conditions set forth in such
letter or order and such letter or order specifies that no subsequent
restrictions on transfer are required.
(b) Whenever the restrictions imposed by this Article 5 shall
terminate, as hereinabove provided, a Purchaser who then holds any particular
Securities then outstanding as to which such restrictions shall have terminated
shall be entitled to receive from the Company, without expense to such
Purchaser, one or more new certificates for such Securities not bearing the
restrictive legend set forth in Section 5.1(a) hereof.
5.4 Compliance with Rule 144 and Rule 144A. At the written request of
any Purchaser who proposes to sell any of Securities in compliance with Rule
144, the Company shall furnish to such Purchaser, within 10 days after receipt
of such request, a written statement as to whether or not the Company is in
compliance with the filing requirements of the SEC as set forth in such Rule.
For purposes of effecting compliance with Rule 144A, in connection with any
resales of any Securities that hereafter may be effected pursuant to the
provisions of Rule 144A, any Purchaser desiring to effect such resale and each
prospective institutional purchaser of such shares designated by such Purchaser
shall have the right, at any time the Company is not subject to Section 13 or
15(d) of the Securities and Exchange Act, to obtain from the Company, upon the
written request of such Purchaser and at the Company's expense the documents
specified in Section (d)(4)(i) of Rule 144A, as such rule may be amended from
time to time.
5.5 Non-Applicability of Restrictions on Transfer. Notwithstanding the
provisions of Section 5.2 hereof, any record owner of Securities may from time
to time transfer all or part of such record owner's Securities (i) to a nominee
identified in writing to the Company as being the nominee of or for such record
owner, and any nominee of or for a beneficial owner of Securities identified in
writing to the Company as being the nominee of or for such beneficial owner may
from time to time transfer all or part of the Securities registered in the name
of such nominee but held as nominee on behalf of such beneficial owner, to such
beneficial owner, (ii) to an Affiliate of such record owner, or (iii) if such
record owner is a partnership or limited liability company or the nominee of a
partnership or limited liability company, to a partner, member, retired partner
or member, or estate of a partner, member or retired partner or member, of such
partnership or limited liability company, so long as such transfer is in
accordance with the transferee's interest in such partnership or limited
liability company and is without consideration; provided, however, that (1) such
record owner shall deliver a written notice to the Company describing in
reasonable detail the manner of such transfer or sale prior to the consummation
of such transfer or sale, (2) each such transferee shall remain subject to all
restrictions on the transfer of Securities herein contained, and (3) if
reasonably requested in writing by the Company within five days after receipt of
such written notice, such record owner shall deliver to the Company such
additional information requested by the Company or its counsel (in form and
substance satisfactory to the Company and such counsel) that the proposed
transfer is within the scope of this Section 5.5 or a written opinion of counsel
for such record owner (provided that such counsel, and the form and substance of
such opinion, are reasonably satisfactory to the Company) to the effect that
such transfer or sale may be effected without the registration of such
Securities under the Securities Act.
ARTICLE 6
CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL
6.1 Conditions to the Company's Obligation to Sell. The obligation of
the Company hereunder to issue and sell the Preferred Stock to any Purchaser at
the Closing is subject to the satisfaction, as of the Closing Date and with
respect to such Purchaser, of each of the following conditions thereto, provided
that these conditions are for the Company's sole benefit and may be waived by
the Company at any time in its sole discretion:
(a) Such Purchaser shall have executed this Agreement and the
Ancillary Documents and delivered the same to the Company.
(b) Such Purchaser shall have wired same-day funds to the
account designated by the Company equal to the applicable portion of
the Purchase Price.
(c) The aggregate Purchase Price delivered by all of the
Purchasers for the Preferred Stock purchased at the Closing shall equal
at least $8,000,000.
(d) The representations and warranties of such Purchaser shall
be true and correct as of the date when made and as of the Closing as
though made at that time (except for representations and warranties
that speak as of a specific date), and such Purchaser shall have
performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the applicable Purchaser at or
prior to the Closing.
(e) No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent
jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which restricts or prohibits the
consummation of any of the transactions contemplated by this Agreement.
ARTICLE 7
CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE
7.1 The obligation of each Purchaser hereunder to purchase the
Preferred Stock to be purchased by it on the Closing Date is subject to the
satisfaction of each of the following conditions, provided that these conditions
are for each Purchaser's sole benefit and may be waived by such Purchaser at any
time in such Purchaser's sole discretion:
(a) The Company shall have executed this Agreement and the
Ancillary Documents and delivered the same to Purchasers.
(b) The Company shall have delivered to each of the Purchasers
duly executed certificates for the Preferred Stock being so purchased
by such Purchaser.
(c) The Conversion Shares shall be approved for quotation on
The NASDAQ Stock Market and trading in the Common Stock shall not have
been suspended by The NASDAQ Stock Market or the SEC or other
regulatory authority.
(d) The representations and warranties of the Company shall be
true and correct as of the date when made and as of the Closing as
though made at that time and the Company shall have performed,
satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the Company at or prior to the Closing.
Purchaser shall have received a certificate, executed by the Chief
Executive Officer or Chief Financial Officer of the Company, dated as
of the Closing Date to the foregoing effect.
(e) The Purchasers shall have completed to their satisfaction
all business, legal, accounting and financial due diligence with
respect to the Company.
(f) No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent
jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which restricts or prohibits the
consummation of any of the transactions contemplated by this Agreement.
(g) Purchasers shall have received the Officer's Certificate
described in Section 3.3 dated as of the Closing Date.
(h) Purchaser shall have received an opinion of Xxxxxxxxxxxx
Xxxx & Xxxxxxxxx, dated as of the Closing Date, in the form attached
hereto as Exhibit D.
(i) The aggregate Purchase Price delivered by all of the
Purchasers for the Preferred Stock purchased at the Closing shall equal
$8,000,000.
(j) The Company shall have delivered to the Purchasers
certificates of good standing of the Company and the subsidiaries which
are organized pursuant to the corporate laws of a State within the
United States as of a date no earlier than ten days prior to the
Closing.
(k) The Company shall have delivered to the Purchasers a
certificate executed by its secretary certifying (i) a copy of the
Company's certificate of incorporation and the by-laws, (ii)
resolutions authorizing the execution of this Agreement and the
Ancillary Documents, and (iii) incumbency matters.
(l) The Certificate of Designation shall have been approved
for filling by the Delaware Secretary of State.
(m) Purchasers shall have received evidence in a form
reasonably satisfactory to Purchasers, that the Company has repaid all
amounts owed to Foothill Capital Corporation and has repurchased all
outstanding shares of the Company's Series B Convertible Participating
Preferred Stock.
(n) Without limiting the generality of Section 7.1(d), no
Material Adverse Effect shall have occurred, nor shall any event or
events have occurred which would reasonably likely to have a Material
Adverse Effect.
ARTICLE 8
GOVERNING LAW; MISCELLANEOUS
8.1 Governing Law; Jurisdiction. This Agreement shall be governed by
and construed in accordance with the Delaware General Corporation Law (in
respect of matters of corporation law) and the laws of the State of New York (in
respect of all other matters) applicable to contracts made and to be performed
in the State of New York, without giving effect to the principles of conflicts
of law. The parties hereto irrevocably consent to the jurisdiction of the United
States federal courts and state courts located in the County of New Castle in
the State of Delaware or the County of New York in any suit or proceeding based
on or arising under this Agreement or the transactions contemplated hereby and
irrevocably agree that all claims in respect of such suit or proceeding may be
determined in such courts. The Company and each Purchaser irrevocably waives the
defense of an inconvenient forum to the maintenance of such suit or proceeding.
Service of process upon the Company or any Purchaser mailed by certified mail,
return receipt requested, shall be deemed in every respect effective service of
process upon the Company in any suit or proceeding arising hereunder. Nothing
herein shall affect Purchaser's right to serve process in any other manner
permitted by law. A final non-appealable judgment in any such suit or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on such
judgment or in any other lawful manner.
8.2 Counterparts. This Agreement may be executed in two or more
counterparts, including, without limitation, by facsimile transmission, all of
which counterparts shall be considered one and the same agreement and shall
become effective when counterparts have been signed by each party and delivered
to the other party. In the event any signature page is delivered by facsimile
transmission, the party using such means of delivery shall cause additional
original executed signature pages to be delivered to the other parties.
8.3 Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
8.4 Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement or
the validity or enforceability of this Agreement in any other jurisdiction.
8.5 Entire Agreement; Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor any Purchaser makes any
representation, warranty, covenant or undertaking with respect to such matters.
No provision of this Agreement may be waived other than by an instrument in
writing signed by the party to be charged with enforcement and no provision of
this Agreement may be amended other than by an instrument in writing signed by
the Company and each Purchaser.
8.6 Notice. Any notice herein required or permitted to be given shall
be in writing and may be personally served or delivered by nationally-recognized
overnight courier or by facsimile-machine confirmed telecopy, and shall be
deemed delivered at the time and date of receipt (which shall include telephone
line facsimile transmission). Each party shall provide notice to the other party
of any change in address. The addresses for such communications shall be:
If to the Company:
LaserSight Incorporated
00000 Xxxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Chief Financial Officer
After June 30, 1998:
LaserSight Incorporated
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Chief Financial Officer
with a copy to:
Xxxxxxxxxxxx Xxxx & Xxxxxxxxx
Xxx Xxxxxxxxxxxx Xxxxxx
Xxxxx 0000
Xx. Xxxxx, Xxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxx X. Xxxxxxxxx
If to the Purchasers:
c/o Dawson Samberg Capital Management, Inc.
000 Xxxxxx Xxxxxx, X.X. Xxx 000
Xxxxxxxxx, Xxxxxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx Xxxxxx
with a copy to:
Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Telecopy: (000) 000-0000
Attention: Xxxxx Xxxxx
8.7 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. Neither
the Company nor any Purchaser shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other. The
provisions of this Agreement which are for each of the Purchaser's benefit as a
purchaser of holder of Securities are also for the benefit of, and enforceable
by, any subsequent holder of such Securities.
8.8 Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
8.9 Survival. All representations and warranties in this Agreement
shall survive the execution and delivery of this Agreement and the Closing. All
agreements contained herein shall survive the Closing until, by their respective
terms, they are no longer operative.
8.10 Indemnification.
(a) The Company shall indemnify and hold harmless each Purchaser, their
respective officers, directors, partners, employees, attorneys, agents,
representatives, successors and assigns (each a "Purchaser Entity") from any (a)
Losses (as defined herein) insofar as such Losses (or actions in respect
thereof) incurred or suffered by a Purchaser Entity (whether incurred or
suffered directly or indirectly through ownership of capital stock of the
Company) arise out of or are based upon or are incurred as a result of (i) the
breach or falsity or incorrectness as of the Closing Date of any representation
or warranty, covenants or agreements of the Company contained in or made
pursuant to this Agreement, or (ii) the existence of any condition, event or
fact constituting, or which with notice or passage of time, or both, would
constitute a default in the observance of any of the Company's undertakings or
covenants hereunder, under the Ancillary Documents or the Company's certificate
of incorporation and by-laws. The Company shall also pay all reasonable
attorney's and accountant's fees and costs and court costs incurred by any
Purchaser in enforcing the indemnification provided for in this Section 8.10.
Notwithstanding the foregoing, the Company expressly agrees and acknowledges
that the right of indemnification granted herein to each Purchaser of shall not
be deemed to be the exclusive remedy available to such Purchaser for any of the
matters described in this Section 8.10.
(b) For purposes of this Section 8.10, "Losses" shall mean each and all
of the following items. claims, losses, (including, without limitation, losses
of earnings) liabilities, obligations, payments, damages (actual, punitive or
consequential), charges, judgments, fines, penalties, amounts paid in
settlement; costs and expenses (including, without limitation, interest which
may be imposed in connection therewith, costs and expenses of investigation,
actions, suits, proceedings, demands, assessments and fees, expenses and
disbursements of counsel, consultants and other experts). Any payment (or deemed
payment) by the Company to a Purchaser pursuant to this Section 8.10 shall be
treated for federal income tax purposes as an adjustment to the price paid by
such Purchaser for the Preferred Stock pursuant to this Agreement.
(c) Within five days after a party seeking indemnification under this
Section 8.10 shall become aware of the facts indicating that a claim for
indemnification may be warranted, such party shall give to the party from whom
indemnification is being sought a claim notice relating to such Losses (a "Claim
Notice"). Each Claim Notice shall specify the nature of the claim, the
applicable provision(s) of this Agreement or other instrument under which the
claim for indemnity arises and, if possible, the amount or the estimated amount
thereof.
8.11 Stamp Tax and Delivery Costs. The Company will pay all stamp and
other taxes, if any, which may be payable in respect of the sale or other
transfer of the Securities to Purchasers and the issuance thereof to the
Purchasers or their nominee, and will save Purchasers harmless against any loss
or liability resulting from nonpayment or delay in payment of any such tax. The
Company will also pay all reasonable costs of delivery to Purchasers, or
Purchasers' nominee, of the Securities to be purchased by Purchasers or
otherwise transferred to Purchasers.
8.12 Public Filings; Publicity. No party hereto shall make any public
statement regarding the transactions contemplated hereby unless the language and
timing of such statement has been approved by both the Company and Purchasers.
Notwithstanding the foregoing, each of the parties hereto may, in documents
required to be filed by it with the SEC or other regulatory bodies, make such
statements with respect to the transactions contemplated hereby as each may be
advised is legally necessary upon advice of its counsel; provided, however, that
the party making such determination shall immediately notify the other party
that it intends to make a public announcement and the parties hereto shall, in
good faith, attempt to agree on any public announcements or publicity statements
with respect thereto (which approval shall not be unreasonably withheld or
delayed).
8.13 Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
8.14 Remedies. No provision of this Agreement providing for any remedy
to a Purchaser shall limit any remedy which would otherwise be available to such
Purchaser at law or in equity. Nothing in this Agreement shall limit any rights
a Purchaser may have with any applicable federal or state securities laws with
respect to the investment contemplated hereby.
8.15 Termination. In the event that the Closing shall not have occurred
on or before June 15, 1998, unless the parties agree otherwise, this Agreement
shall terminate at the close of business on such date.
[Remainder of page intentionally left blank.]
IN WITNESS WHEREOF, the undersigned Purchasers and the Company have
caused this Agreement to be duly executed as of the date first above written.
LASERSIGHT INCORPORATED PEQUOT PRIVATE EQUITY FUND, L.P.
By: /s/ Xxxxxxx X. Xxxxxx By: Dawson Samberg Capital Management, Inc.
---------------------------- Investment Manager
Xxxxxxx X. Xxxxxx
President and CEO By: /s/ Xxxxx Xxxxxx
--------------------------------------
Name: Xxxxx Xxxxxx
--------------------------------------
Title: CFO
--------------------------------------
PEQUOT SCOUT FUND, L.P.
By: Dawson Samberg Capital Management, Inc.
Investment Manager
By: /s/ Xxxxx Xxxxxx
--------------------------------------
Name: Xxxxx Xxxxxx
--------------------------------------
Title: CFO
--------------------------------------
PEQUOT OFFSHORE PRIVATE EQUITY FUND, INC.
By: /s/ Xxxxx Xxxxxx
--------------------------------------
Name: Xxxxx Xxxxxx
--------------------------------------
Title: CFO
--------------------------------------
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT
